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| A birds-eye view of Samsung's memory chip factory in Xian, China, is seen in this file photo. Korea Times file |
By Kim Yoo-chul
How to minimize the adverse effects of growing regulatory pressure from the Chinese government is at the top of the agenda for Samsung Electronics' corporate meeting from June 22 to 26, officials familiar with the issue said Monday.
"Maximum pressure may bring a change in industrial policies. Samsung needs to prepare for further unfavorable scenarios as China is pressing it on multiple fronts. Weak smartphone growth and ways to recover growth in the TV and OLED panel businesses are secondary issues," a company official said.
The meeting is held in June and December each year to measure and review Samsung Electronics' global operations. Samsung's top three business divisions _ electronic components, IT and mobile phones and consumer electronics _ hold separate meetings on June 22, 25 and 26.
The official, who wished to remain anonymous, added participants will discuss how to sustain profitability as Samsung Electronics addresses many external and internal issues.
"Earlier, Samsung's priority was commitment to business, but we have to think how to sustain it for the long term and look beyond the next yearly report. Growing a business requires the best-fit intellectual capital, selected strategic partnerships, in addition to services and products the market demands. China was a land of opportunity, but Samsung's problem is it is now demanding access to patents in smartphones, displays and semiconductors," another official said.
The Chinese government's moves over the past few years have helped propel local companies at the expense of foreign giants, including Samsung.
The Korean firm is the largest foreign investor in China at more than $14 billion. But the size of China's market also means even small changes in government policy or consumer demand can affect its earnings.
"It's fair to say Samsung is facing a China dilemma. Getting favors from the government in exchange for more investment was the old formula. What China wants is to help domestic companies via expanded partnerships with foreign companies operating there. This is a bit challenging. Attendees discussed this issue," the second official said.
He said participants discussed the cases of Google and Facebook, which China has blocked. China's censors have also blocked Kakao Talk and Line, which is good news for Tencent that owns China's dominant platform WeChat.
Samsung is being investigated by the Anti-Monopoly Bureau of China's Ministry of Commerce over its alleged involvement in a memory chip price-fixing scheme. Samsung is the world's top leader in memory chips. China alleged the rising prices have made Chinese PC-OEMs and handset manufacturers struggle.
For smartphones, in which Samsung is the global leader but has a market share below 1 percent in China, executives discussed ways to expand its share by increasing subsidies and spending on ads for flagship devices for "premium customers."
Samsung is benchmarking Apple, which has long touted China as a growth story for the iPhone. The company opened its 10th Apple Store in China recently.
"If necessary, Samsung needs to do more to overcome its weak image in China with more brand advertising campaigns rather than one-time product ads. The deployment of faster networks throughout China is expected to stoke demand for premium phones. Samsung can be ready for this," he said.
But Samsung Vice Chairman Lee Jae-yong, the group's de facto head, will miss the conference in what Samsung officials say is in accordance with a group-wide strategy to separate ownership and management.
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